Lido Finance is set to launch its V2 upgrade on May 15, enabling direct withdrawals of staked ETH. This could create selling pressure on Ethereum price, which has been struggling lately.
Lido Finance, a Decentralized Autonomous Organization (DAO) and a liquid staking protocol declared on Monday that its version 2 update would be introduced on May 15 if the community approves in a three-day vote.
The update will facilitate withdrawal requests and direct Ether withdrawals within the protocol. This allows users with staked Ether (stETH) to exchange it for Ethereum, resulting in the withdrawal of approximately 270,000 ETH.
Users can withdraw their ETH without any extra waiting time with Lido. The vault will keep accepting new ETH deposits after removing this amount of ETH.
According to Lido, the V2 upgrade has passed the tests on the Goerli Testnet and the audit, and the off-chain tool is now available for deployment. Security was the primary concern throughout the entire process.
How the release of staked ETH could affect ETH price
Ethereum, the second-largest cryptocurrency by market capitalization, has been on a downward trend since May 12, when it reached its all-time high of $4,362. It is trading at around $3,800, a decline of over 12% in the past week.
Lido’s release of such a significant amount of ETH could increase the selling pressure on the Ethereum price. A large amount of unlocked ETH could push Ethereum’s price down across exchange platforms, but the exact amount is unknown.
The price of Ethereum, according to some analysts, is due for a correction after its massive rally this year. They note that Ethereum confronts several challenges, including high gas fees, scalability issues, and competition from other smart contract platforms.
Others, however, have argued that Ethereum’s fundamental value proposition and community are robust. They cite the upcoming transition to Ethereum 2.0, which will bring proof-of-stake consensus and sharding technology, as well as the increasing adoption of Ethereum-based decentralized applications (DApps) and decentralized finance (DeFi) protocols.
Investors in Ethereum should anticipate greater market volatility and unpredictability and seek to mitigate and diversify their portfolios.
